Average is not good enough … Our goal at Family Investment Center is excellence. We find excellent investment products and supervise an excellent service package. We maintain a library of excellent research materials and financial planning resources. We also demand top safety and security for our clients.
We won’t settle for average. We continually seek top managers or securities and meld them into superior custom portfolios. Each palette of investments is carefully tailored to personal or family goals. We enlist excellent managers, research, resources, and effort for our clients. Don’t settle for average. You deserve excellence.
Please search our blog posts for answers to common investment questions, and we look forward to sharing our knowledge and experience with you first-hand.
Solid Strategies for Building Wealth ... Avoid These Mental Pitfalls
Careful and diligent planning over time is a reliable strategy for building wealth, but did you know that your mind may be working against you and your long-term plans? There are a number of mistakes that people make in their financial decisions that can throw off their wealth strategies. Here’s a quick guide to ways that your mind can trick you into making poor financial decisions:
Anchoring: Don’t fall into the trap of relying too much on the first piece of information you learn about something. For instance, pretend you are interested in hiring a housecleaning service and you begin to call around to check rates. The first company you call quotes you $75 per hour. The second company gives you a rate of $90 per hour.
You may dismiss the second company because they are charging $15 more per hour and go with the first company instead. In fact, though, the going rate in your community is $60 per hour, but you overpaid because of the anchoring fallacy.
How do you get past anchoring if you don’t have endless hours to call cleaning companies and compare every rate out there? Some experts recommend that, instead of trying to get a true average rate, you estimate how many hours you’d have to work to cover the cost of a service or product, or what else you will have to give up to purchase it. This might help you get a truer sense of your cost.
One particularly strong anchor in investing is a stock’s price. Investors tend to keep their purchase price at the forefront when making trading decisions. For example, if you buy a stock at $10 per share and it’s currently trading at $8 per share, you may hesitate selling the stock because it’s lower than your initial purchase price. But what if the stock was overvalued when you bought it? Anchoring is often responsible for investors selling winners too soon or holding losers for too long.
Availability Heuristic: In this financial misstep, you pay more attention to more publicized events over those that are most likely to actually happen. For instance, you may have an outsized anticipation of winning the lottery because instances of lottery winners shown on the news stand out in your mind.
This concept carries over to other areas in life, too. You may have sweated a little on a trans-Atlantic flight, but probably not on your drive to the grocery store. Despite the fact that traffic accidents are far more likely than a plane crash, you brain latches on to news stories you’ve seen about flights that ended in crisis.
Likewise, an investor tends to overreact to the “talking heads” on the radio or television who warn of doom and gloom in the markets.
Hedonic Adaptation: When you purchase something new, you often feel a rush of satisfaction and excitement. In some cases, such as with a new car or a dream home, you may feel unable to contain yourself as you bask in the glow of acquisition. Even a new pair of shoes or a weekend trip can make you feel like you could never ask for anything more.
The trouble is, you always do, and it’s keeping you from building wealth. The hedonic adaptation principle says that no acquisition is capable of satisfying you forever. What’s more, you become less willing to go back to your previous lifestyle, even though your new purchase isn’t satisfying you like it did when it was new.
Overconfidence: Overestimating your own ability, at choosing investments, for example, can be detrimental to your financial strategy. If you don’t have the time, expertise and experience to handle an investment portfolio, consider hiring an investment advisor to help.
Hindsight: We’ve all heard it: “hindsight is 20/20.” When analyzing past events, it’s easy to hinge on information that hadn’t been available at the time, believing that the event was predictable (and perhaps preventable) when it really wasn’t. For example, after a stock market crash, you suddenly think of many reasons why youshould have adjusted your portfolio more conservatively, when in reality, there was no way of knowing it was coming. (Interestingly, hindsight can lead to overconfidence, as well.)
Building wealth over time takes a lot of discipline, but it also takes an awareness of the tricks your mind might play on you as you make financial decisions. No matter how solid your wealth strategies are, be careful that you aren’t derailing your goals by buying into these fallacies.
To learn more practical ways to think about building wealth, make an appointment to talk with the advisors at Family Investment Center. Always commission-free and client-focused, we help you develop strategies that are clear-minded and designed to help you plan for a solid future.
Dan Danford Explains 5 Surprising Investing Myths in “Money is Freedom” Podcast Episode
Much of our financial knowledge comes from trusted sources – friends, coworkers, colleagues, family members. But a lot of this information requires a serious update. In fact, it may be holding you back from the success you want.
Today, ask yourself this: Are you believing the five common myths (mistakes) about DIY money management? These mistakes include relying on the “special knowledge trap,” “soapbox time” and “vacuum investing.”
Listen to this brief, jargon-free and value-packed podcast today. It might change your thoughts on DIY investing, and, more importantly, it might change your future.
Listen to the “DIY Mistake” here on Sound Cloud:
Listen to Dan Danford on “Money is Freedom” on iTunes.
Recent Numbers on Investing for Women Show Increasing “Clout”
The numbers of male clients to female clients at investment firms began to even out during 2016, says a recent CNBC article. Why? Because the number of women who have reached millionaire status is also climbing. In fact, it’s believed that in the next 13 to 15 years, as much as 66 percent of wealth in the U.S. will be owned by women. How do these numbers affect investing for women?
According to the article titled “For Women, Retirement Can Be a Serious Challenge,” wealthy women are emerging now in stronger numbers. Approximately 45 percent of millionaires in the U.S. are female, says the article. During the next 14 to 15 years, females will be responsible for at least 66 percent of the country’s wealth. As a reflection of these numbers, it’s no surprise that women are currently the chief money makers in nearly half of U.S. households.
What’s the Challenge?
The numbers are encouraging, yet unique challenges remain for women in investing. As of 2015, women earned roughly 80 percent of what men were paid. This means when retirement comes around, women will draw less in Social Security benefits.
Many women choose to shift focus away from their careers during top-earning years to turn more attention to raising children, meaning less money goes into their retirement accounts. Some work part-time for a season to raise their families, which often makes them ineligible for employer-sponsored retirement programs.
In addition, with 63 million women earning wages today, only 45 percent are enrolled in retirement savings accounts. Of those that are enrolled, they average 50 percent less in their accounts than their male counterparts.
Another challenge, say experts, is that women who reach the age of 65 will live, on average, another 20.5 years. This means many of them will need more money in their retirement accounts than anticipated to live comfortably. Ultimately, too many women may be underfunded in their retirement accounts.
Addressing the Challenges
Investments can be a challenge, even for those who consider studying financial and investment news an enjoyable hobby. That’s why bringing an advisor into the plan can create a number of advantages.
An advisor can put together a plan considering all your information, including your insurance policies, your tax returns and banking records, information about mortgages and loans and all the investment records on your retirement accounts. Your advisor will help you create a strategy, which includes prioritizing expenses in categories such as wants and needs. This will help you devise a savings plan that matches your goals for retirement.
If debt is a concern, an advisor can assist you here as well. You might be surprised to learn that some debt can actually be used as leverage to increase your success. Contrary to some popular thought, not all debt is a hindrance to reaching your goals.
One of the most important things a good investment advisor will do is help you establish your goals and an investment plan that will help you reach those goals – despite media headlines, emotions and market shifts.
A final note: When you look for an advisor, find one that operates as a fiduciary. When you partner with a fiduciary, you have an advisor that puts your interests first. Also, a “fee-only” advisor will never take a commission on an investment they recommend. This is how Family Investment Center has operated from the start. Contact us today and find out more about what makes us so unique.
Do You Know What to Look for in Portfolio Management Fees?
The Beatles said in their hit song, “Money,” that the “best things in life are free,” and they definitely have a point. However, when it comes to managing your money, paying fees to a portfolio management professional can help that money grow, and it’s certainly worth it.
However, due to industry complexities and varying degrees of customer “service,” investment management fees can often be obscure. This can lead to mistrust and poor decisions on behalf of the investors. While the most trustworthy investment advisors use fee structures that are completely transparent, following the tips in a “fee triangle” can assist you in understanding exactly what you’re paying for.
Don't be the victim of unfair or elevated pricing schemes. You can avoid this by shining the light in the right places.
The first layer of fees is often tied to local investment management fees. This is usually a percentage of the portfolio size, AKA assets under management or AUM. Your investment advisor, broker, bank, or trust company or department will charge this first layer of fees.
Portfolio manager fees are the second layer, and although they’re the most common, they’re often less obvious. These are fees that the underlying managers of the mutual funds, hedge funds, exchange traded funds, unit trusts, REITs and other managed products charge to manage the fund. It’s how the manager of the underlying investment is paid. Although it’s difficult to rid your portfolio of these altogether (unless you buy only individual stocks), your advisor should aim to find investments that minimize your expenses while maximizing your investment potential.
Transaction fees are the most insidious of all these fees, which are often hidden from you in trades. For instance, if you buy a thousand shares of stock, a trade fee or commission may be paid on that trade, which should be reported on a trade confirmation. However, you may not see it if your custodian reports the trade at “net” prices. Even scarier is that there is often a huge disparity among the level of transaction fees that are charged to clients.
Not all investment portfolios will include all three fees. Some might only have one or two. A stockbroker might have a recommendation for you, and if you follow through on that, they will take their payment through a commission. If a mutual fund is recommended, there could be a sales commission involved, as well as ongoing portfolio manager fees, which means you could be getting hit with all three layers of fees.
Remember - it’s the total fees that matter to performance, not the particular fee scheme. Investment performance should be tied to broad market averages, not individual stocks and bonds. There are too many instances out there today where investors are getting hammered by layered fees, most often in the hidden fees.
At Family Investment Center, we remain totally transparent about our fee structure and communicate it clearly. We never take a commission – the only way we get paid is through a percentage of assets under management. That way, there’s a direct incentive for us to keep clients’ expenses low and their balances growing over time. We follow core investment principles and practices that go above and beyond the definition of a fiduciary. Contact us today and let’s discuss how we approach portfolio management differently.
Why Fiduciaries are Looking Out for Your Investments … and Your Future
Money. It’s a lot of things, but most importantly, it’s a tool. When it comes to investments, money is a tool that helps people reach their goals. Maybe that goal is to have freedom in retirement, or to go to school, or to travel. Perhaps money is the tool that assists a family legacy. Regardless of the goal, making smart investment decisions can leverage your tools and make those goals a reality.
The investment process can be made difficult by the massive volume of information available today through sources that include television, books, magazines and the Internet. Sorting through all of it can lead to confusion andpoor decision making that can have a negative impact on investments and end goals, which is why it truly pays to have an expert on your side in the form of a fiduciary.
A good investment advisor will explain these complexities in layers, presenting the easiest-to-absorb information first. Some investors are more comfortable taking a hands-off approach and letting their advisor take control. Others have a more vested interest and want to drill down on specifics, which often require a custom dashboard that simplifies the important and complex points.
Dan Danford, CEO of Family Investment Center, is often quoted as saying his firm can provide as much depth as a client wants.
“I’m glad to answer questions and provide detail,” Danford said. “However, just because we follow all the details doesn’t mean clients need or want all that information to get to their goals. We tailor our conversations toward each individual’s preferences. A fiduciary can follow a client’s path through life; looking out for their best interests and helping them achieve their goals along the way.”
For an investment advisor operating as a fiduciary, these end goals might include establishing a fund for a child’s college account, for example. Ultimately, the child graduates from college utilizing that fund, and go on to establish a career and perhaps even begins to save for their own child’s college fund.
Danford says investment advisors feel a special kind of attachment when their client reaches their goals. The relationship that a good investment advisory team forms with a client and their family can span for years – and is often marked by life events and milestones along the journey.
“There is a wonderful sense of friendship and camaraderie among our team and the clients we help,” he says. “In that regard, our clients’ stories, their phone calls, or visits to our office remind us that we are creating brighter futures for families each day.”
Additionally, Danford seeks to remind investors that fiduciaries offer their services based on fees only - not commissions. This allows them to truly focus on the outcomes of the client’s portfolio, rather than their own benefit. This is especially important today when pending national industry changes mean many firms will say they are client-focused - but may not have true experience in this area. (Note: A 2015 report from the White House and Department of Labor indicates investors lose roughly $17 billion a year due to brokers offering conflicted advice. Read more about the report here.)
At Family Investment Center, we have always operated as a fiduciary and always in a commission-free, jargon-free and client-focused setting. Schedule a meeting with us today.